PIRA sees China as last hope for spot LNG winter cargoes

NYC-based PIRA Energy Group believes that China is the last best hope for spot cargo support this winter, though seasonal factors could still emerge to drive up incremental sales in Japan and Korea in 1Q.

Last week’s indicated U.S. storage change in the EIA’s weekly report easily could be termed shockingly bearish. A massive week-on-week markdown in withdrawals was universally expected relative to both the prior report’s hefty pull and the cold weather inflated year-ago figure. Yet, the reported 22 BCF draw fell well below consensus centered in the mid-30s. Consequently, this Gas Flash makes short-term adjustments to PIRA’s Henry Hub Reference Case prices ahead of the normal Gas Forecast Monthly update to reflect higher 1Q domestic production and revised end-2014 storage levels that now equate to a disquieting year-on-year surplus of 170 BCF.

PIRA also adds that Turkey is the only gas market growing in Europe (up by 8.8% in 2014) and will be important to Russian gas marketing on several levels in the future. Turkey will replace Bulgaria as the southern entry point for its marketing strategy in Europe and at the end of the day, it was a smart move that creates more flexibility for Russian gas marketers down the road. PIRA does not find the demise of the South Stream pipeline to be a particularly significant moment in the evolution of the European gas market because it never thought it would be built in the first place.

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